Bottled water doesn’t get much greener than Belu’s. The British company’s drink was the world’s first to become carbon-neutral, in 2006. Its bottles, made from corn, can be composted into soil. Belu’s profits, meanwhile, are poured into projects that deliver clean water to parts of the world that lack access to it. And amid the thirst for all things sustainable, this has meant Belu — pronounced Blue — has gone down rather well. Sales of just $13,000 in 2004, its launch year, rose to close to $4 million in 2008. Defying the downturn, the company even managed a modest profit.

But getting consumers to buy is only half the battle. All the granola credentials in the world won’t fund a promising business. To potential investors, it’s pesky things like risk and reward that still matter most. And as an ambitious nonprofit firm surviving in a ferociously competitive sector — rivals include Coca-Cola and Nestlé — Belu has been stymied more than most. “We’ve struggled to get funding, as Belu is aimed at helping the environment, not lining investors’ pockets,” says Reed Paget, the Seattle native who is the company’s chief executive and founder. “That’s put a lot of strain on the company.” (See pictures of Belu’s plant.)

Bereft of any experience running a business, Paget actually has a pretty remarkable record at Belu: half a million bottles of its water, each emblazoned with environmentally friendly messages, are sold monthly, and it’s now distributed in about 1,000 outlets in Britain. But Belu’s potential would be much bigger — global — if it could get funding. With Belu’s shares held by its own nonprofit, venture-capital and private-equity investors can’t expect the usual juicy reward in exchange for financial backing. Offered a savings-account-like return or the chance to buy shares whose dividends accrue to organizations working in the clean-water field, VCs have balked. “I probably would have had more success robbing banks than getting funding from those sources,” Paget says.

Environmental charities have been no more forthcoming. Investing in firms like Belu is “not what we’re here to do,” says a Greenpeace spokesman. “Our role is campaigning.” That’s left the firm reliant on a limited bunch of angel investors — from Body Shop co-founder Gordon Roddick to Big Issue Invest, experts in backing social enterprises — willing to stomach little or no return in exchange for long-term benefits to the environment. With $2.5 million raised through 32 painstaking rounds of funding, “the business is massively undercapitalized,” says Ben Goldsmith, a London-based philanthropist and VC who’s among Belu’s creditors. “And that’s a challenge.”

Why not go the capitalist route and use the profits that a conventionally funded expansion would bring to increase his good works? Pointing to the small profit he’s made on modest means, Paget is confident Belu can grow without more serious money. But for the chance to scale up his business, “if we can get it, we would definitely love it,” he says.

Paget is adamant, though, that it should be on Belu’s terms, not those of a traditional investor. He says it was important “to remove the ‘We must maximize profit’ from our management system.” Sure, Belu needs to be able to sell for more than the cost of production, but, he says, if it came down to more profit vs. more environmental benefit, VCs may suddenly decide they don’t want to be that deep a shade of green after all.

But with Belu being unwilling to accept that risk, the cost to the company may be the sustainable growth of a clearly good business.